Government of Canada Releases Proposed Cannabis Regulatory Framework

As the target date of July 1, 2018 for cannabis legalization approaches, the federal government is gearing up to have supporting regulations in place for the implementation of the Cannabis Act.1 The proposed cannabis regulatory framework was released by Health Canada through a consultation paper on November 21.2 The federal government is now seeking input from stakeholders until January 20, 2018. The federal government intends to publish the final regulations soon after Royal Assent of the Cannabis Act, but will not be pre-publishing the draft regulations.

What You Need To Know

July 1, 2018: It is extremely unusual not to pre-publish draft regulations for consultation. This suggests the federal government is determined to meet the date of July 1, 2018 to implement the Cannabis Act.

Uncertainty: The lack of pre-publication of the draft regulations for consultation means there will be uncertainty regarding what will be required to comply with law. This uncertainty imposes an additional regulatory burden on those subject to the law.

Providing input: Because the draft regulations will not be pre-published for comment, it is important that stakeholders provide comments on the proposed regulatory framework during this consultation period.

Licences

Types of licences: The proposed regulatory framework would establish different types of cannabis authorizations depending on the activity undertaken and the scale of the activity. The proposed types of licenses include authorization for cannabis cultivation, processing, sale, analytical testing, import and export, and research. The authorized activity under each licence would generally include both the core activities and related supplementary activities. For example, a cultivation licence holder would be able to cultivate cannabis, as well as conduct research and development related to the cultivation of cannabis.

Licence requirements: The proposed regulations would set out licencing requirements for each class of cannabis licence. The proposed period of validity for licences issued under the Cannabis Act would be a maximum of five years. Furthermore, the conduct of any licensed activity in a dwelling-house would be prohibited and good production practices would be required to be followed for the cultivation and processing of cannabis.

Import and export: The proposed regulatory framework will continue to restrict the import and export of cannabis. Permits would be issued for the import or export of cannabis for medical or scientific purposes, as well as for industrial hemp. The permit would be valid for a maximum of six months.

Security clearances

The proposed regulatory framework would require the following personnel associated with cannabis licences to hold a valid security clearance issued by Health Canada:

employees who hold key positions with access to sensitive security or business information;

directors and officers of the organization and any parent company; and

major shareholders.

The decision to grant security clearance would be made on a case-by-case basis. Information provided by the applicant, criminal record checks, and law enforcement record checks would all be part of the consideration. Health Canada has indicated it will not grant security clearance to individuals with known association to organized crime and past convictions of drug trafficking, corruption, or violent offences.

However, with respect to individuals with non-violent, lower-risk criminal activities, Health Canada is considering whether such individuals should be permitted to participate in the legal cannabis industry based on feedback from the consultation process.

Tracking system

A national Cannabis Tracking System would be authorized by the proposed Cannabis Act. The system would track cannabis throughout the supply chain to prevent illegal cannabis diversion. The proposed regulatory framework would require any person authorized to conduct activities with cannabis to report into the system. Activities with industrial hemp and lower risk research and development would be exempt from reporting.

Products

The proposal indicates the regulations will establish rules and standards for the production of cannabis products. The sale of dried cannabis, cannabis oil, fresh cannabis, cannabis plants, and cannabis seeds would be permitted by the initial regulations with amendments to allow for the sale of edibles and concentrates by July 2019. The proposed regulatory framework would allow a range of product forms of dried and fresh cannabis, such as pre-rolled cannabis and vaporization cartridges manufactured with dried cannabis. The maximum THC content per unit will be regulated based on the form of the cannabis product. The proposal suggests a maximum of 10 milligrams of THC for a single unit of cannabis product intended for ingestion. Cannabis oil would continue to be subject to the limit of 30 milligrams per millilitre of THC content.

Packaging and labelling

Consistent with the current medical cannabis law, the proposed regulatory framework would require all cannabis product packaging to be tamper-evident and child-resistant. Strict limits on the color, graphics, and other special characteristics of packaging are also proposed. Warning labels similar to tobacco products would also be required.

Medical cannabis

The proposed regulatory framework would include a distinct system for patients to access cannabis for medical purposes, which would remain substantively similar to the existing system.

Health products and cosmetics

The proposed regulatory framework would expand the use of cannabis to more health products, including prescription and non-prescription drugs, natural health products, veterinary drugs and veterinary health products, and medical devices, as well as cosmetics.

Prescription drugs that contain cannabis would generally be reviewed as prescription products and added to the Prescription Drug List once approved.

Cosmetics that contain cannabis would be permitted subject to limitations set by the proposed Cannabis Act and associated regulations.

What's Next

Once approved by Parliament, the new legal framework for cannabis is intended to replace the existing one. Cannabis would be removed from the Controlled Drugs and Substances Act (CDSA) and would be subject to the Cannabis Act and associated regulations. There are transitional provisions in the proposed Cannabis Act. Licences issued under the Access to Cannabis for Medical Purposes Regulations (ACMPR) and the Narcotic Control Regulations (NCR) would remain in effect until expiration or revocation.

A list of consultation questions relating to the proposed regulatory framework for cannabis can be found in the annex to the published consultation paper. We encourage stakeholders to provide feedback on the proposed regulatory framework before the January 20, 2018 deadline.

The proposed Cannabis Act (Bill C-45) received final approval in the House of Commons on November 27 and now moves to the Senate for debate. We will bring you updates to the legalization process of cannabis as they become available.

We have written extensively about emerging trends in the cannabis industry. You can read all of the team's insights by visiting our dedicated cannabis page.

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.